Question mark on Kaye land values

Property marketeer Henry Kaye may have used inflated valuations and valuations based on false information to sell hundreds of Melbourne properties, according to documents obtained by The Age.

Leading valuer A. T. Cocks (now Urbis) valued more than 200 apartments at the Inkerman Oasis development in June 2000 on the basis that all had been sold and each contained a home theatre system as standard.

Yet no apartments had been sold at that time, according to a schedule of sales seen by The Age. And six buyers contacted by The Age said they bought their units after June 2000, one as late as December.

All said home theatres were not included as standard but offered as an upgrade, which they would have had to pay for.

Stating that all properties in the development had been sold would have increased their value. Usually, "the strongest indication of a property's value is its current sale price", valuers Chris Torr and Chamoun Malki wrote in their valuation.

Mr Kaye, who runs property advice seminars and sells property to seminar clients, said the valuation was a guide to his company, not for sales to purchasers. He said he always told buyers to get independent valuations.

At Waterford Green, a Maribyrnong estate where Mr Kaye sold a large number of town houses, documents obtained from Mr Kaye's businesses show that a valuer from leading firm Colliers Jardine valued properties at up to $90,000 more than what purchasers actually paid.

Valuing properties at a high price enabled some buyers to get loans worth up to 100 per cent of the purchase price of their property. However The Age spoke to three purchasers who said Mr Kaye's representatives said their valuation reflected the property's true price. One purchaser, Jimmy Janash, said he tried to sell his property at $365,000 - the price marked on the contract and valuation - but it was passed in at $290,000.

And a Sydney woman said her property was valued at just over $300,000 but when she tried to sell it the highest bid was only $230,000.

Despite the booming property market, The Age has found many re-sales that fall well below the prices on purchasers' valuations and contracts.

Mr Kaye said the valuations were higher than the purchase prices because of a rebate his company offered purchasers. Many builders used the same idea and "there is nothing artificial in these dealings".

He said it was up to purchasers, not his company, to inform lenders as to the property's purchase price.

Mr Torr, who valued the Oasis development, said the valuation was based on specific instructions from the client, "one of Henry Kaye's outfits".

William Doherty, Australian director of valuations at Colliers Jardine, said he could not comment until he had examined the case.

The president of the Australian Property Institute, Barry Brakey, said the institute was concerned about such valuation practices, which could create inflated prices and put both purchasers and credit control processes at risk.

One Sydney buyer said the valuation he received on his Oasis apartment nearly destroyed his investment. The nominal price on his apartment was $437,000, but a 15 per cent discount offered by Mr Kaye reduced it to $371,500.

Yet when the unit was nearly finished earlier this year, the purchaser's bank insisted on its own valuation. That came in at $370,000, $67,000 less than the nominal price. The bank would lend only 80 per cent of its valuation, and the buyer had to add $50,000 of his own money. Had he not been able to pay, "I would have lost my $43,000 deposit".

However another Sydney buyer, Chris Lim, said he was comfortable with the value of his apartment in Oasis.

"Henry Kaye is a very optimistic type of person, you have to take some things with a grain of salt. You have to go in with your eyes wide open."

Mr Lim said he would probably not invest with Mr Kaye again because of his "unconventional" methods. He said he was worried that the rebate "was not very transparent to the bank".